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Posted Wed, 08 Mar 2023 17:58:55 GMT by Earlgrey2202
Hi, if my UK dividend exceed the annual div tax free allowance GBP2k and I become a 40% tax payer through combination of property and dividend income; for 22/23 tax yr - would all my dividend income (after div allowance) become taxable at higher div tax rate of 33.75% or there is a sliding scale where a portion of div income attracts 8.75% and rest at 33.75%? Thank you
Posted Fri, 10 Mar 2023 14:14:25 GMT by HMRC Admin 10
Non savings income is taxed first.
Any dividends above the threshold would be charged at the higher rate if your other income already took you into the higher rate threshold.
Posted Fri, 10 Mar 2023 17:39:40 GMT by Earlgrey2202
Thank you. When I assess my tax rate band (ie 20% or 40%); can I deduct the following before calculating my total income: 1) deduct rates and management fees off the rental income 2) deduct my personal allowance 3) deduct my dividend allowance Thank you
Posted Wed, 15 Mar 2023 13:03:14 GMT by HMRC Admin 32

Working out your Income Tax liability follows a fixed sequence as described in the income taxes act 2007. With income from property, the gross property income has expenses set against it, such as rates and management fees.

Once all of the expenses have been deducted, you have a net income from property and it is this amount that is taxable. This same process applies to self employment and partnerships.  

Once all the deduction have been taken away, you are left with what is taxable. The taxable incomes are added together and your personal allowance used to reduce the taxable figure.  The remaining taxable income is then subject to tax at the rates 20%, 40% and 45%, if appropriate. Once all the income is taxed, we can consider the dividends, minus £2000.00 allowance.  

Dividends are taxed at the Basic rate 8.75%, Higher rate 33.75% & Additional rate 39.35%. They utilise any unused basic rate, or higher rate band, after the other sources of income have been calculated.

Thank you.

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